Russia's richest man Usmanov ditches Apple and Facebook for China

Russia’s biggest billionaire has bought shares in big Chinese internet retailer Alibaba, after selling his stakes in US tech giants Apple and Facebook. The deal comes as the West imposes sanctions on Russia, that could spread from politics to business.

Usmanov, 60, a founder of Russia’s iron ore Metalloinvest holding
company, has an estimated fortune of $18.6 billion as of March
2014 and is increasing his bet on China, while selling American
assets.

“Chinese companies account for about 70 percent to 80 percent
of the portfolio of our foreign internet investments,” Ivan
Streshinskiy, head of Usmanov’s asset-management company USM
Advisors LLC, told Bloomberg in an interview in Moscow.

In the last few months Usmanov sold the stake in Apple he bought
for about $100 million last year, Streshinskiy said.Prior to the
Apple sale the Russian tycoon started a gradual sale of his 10
percent stake in Facebook he bought in 2009, when the company was
valued between $6 billion and $10 billion. Usmanov sold some of
the shares in the Facebook IPO, that valued the company at $104
billion.

Alibaba, the world’s second biggest internet company after Google
Inc., is valued at about $200 billion, as Bloomberg cites an
investment bank data. The Chinese on-line retailer posted surging
sales in the three months through September, marking fourth
straight quarterly profit.

China’s safe harbor

As Russia’s relations with the west sour over the Crimea referendum and the crisis in Ukraine, Usmanov
says his Metalloinvest holding would increase its presence in the
Chinese market, in case Europe imposes sanctions on its exports.

“We are concerned with the possible sanctions against Russia
but don’t see any dramatic repercussions for our business,”
Streshinskiy said. “China is unlikely to impose any
sanctions. So, we will be trading in rubles, yuan, Hong Kong or
Singapore dollars.”

On Monday the EU and the US imposed sanctions against some leading Russian
officials, which include visa bans and asset freezes for
presidential aide Vladislav Surkov and presidential adviser
Sergey Glazyev. No Russian corporate assets have so far been
affected.

China is one of Russia’s biggest trading partners, with bilateral
trade estimated at a record $87.5 billion in 2012.

Over the past years the two countries have been actively strengthening economic ties, with direct investment
by Chinese companies into Russia increasing 40 times, to reach
S4.9 billion between 2004 and 2012, according to Tang Hua, an
official with China's National Development and Reform Commission.

Taking an investment opportunity in a crisis

One of Russia’s key indices - the MICEX – has lost about 15
percent since the start of the unrest in Ukraine and the protests
in Kiev.

Though on Monday Russia’s exchanges reacted positively to the results of the Crimea referendum,
they could see a further fall in the longer term, Streshinskiy
said. If this is the case, Usmanov may buy some shares of the
wireless operator MegaFon and internet company Mail.ru Group.

“Mail.ru and MegaFon revenue is coming from Russia and people
won’t stop making calls and using the internet,”
Streshinskiy said. “If the events further escalate, we will
be buying shares. A crisis is always a good opportunity as
valuations become cheap.”